An Analysis of Optimal Size for a Special Economic Zone

Sugata Marjit and Hamid Beladi

Swiss Journal of Economics and Statistics (SJES), 1997, vol. 133, issue II, 153-164

Abstract: We use a general equilibrium framework with training costs to characterize a special economic zone which uses foreign capital and local labor. Competitive equilibrium without government intervention leads to "overflow" of local labor in the foreign enclave. A sector-specific wage tax implements the "first-best" level of employment in the special economic zone, justifying active government intervention. Our result holds in the extended version of the basic model.

Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:1997-ii-3

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